Sunday, July 17, 2011

Bank Challenger Picked to Run Consumer Agency

President Barack Obama said Sunday he would nominate former Ohio Attorney General Richard Cordray to head the consumer finance watchdog agency created in the wake of the 2008 financial crisis.

During two years as Ohio's attorney general, Mr. Cordray was a leader among state regulators who challenged banks over their mortgage foreclosure practices. His nomination is expected to run into opposition from Senate Republicans and the financial services industry.Mr. Cordray is currently the top enforcement officer at the Consumer Financial Protection Bureau, the agency he would lead if approved by the Senate.Mr. Obama chose Mr. Cordray instead of Elizabeth Warren, the Harvard professor who has been setting up the bureau as a special advisor. Ms. Warren, a longtime critic of the financial-services industry, pushed for its creation and is said by those who know her to have wanted the director post.In the end, White House officials concluded that Ms. Warren was unlikely to win confirmation and that a battle over her nomination could hurt the fledgling bureau, people familiar with the matter said.Mr. Cordray's nomination comes just ahead of the one-year anniversary on July 21 of the passage of the Dodd-Frank financial law, a milestone that is prompting many in Washington to assess the impact of the measure. The consumer agency is a hallmark of the law, created to tame risk taking on Wall Street, prevent taxpayer bailouts and protect consumers. The White House has come under criticism from lawmakers and consumer advocates for failing to nominate an agency head earlier, and the administration wanted to have a nominee before July 21, government officials said.Mr. Cordray won't be confirmed without a fight. Republican senators have already said they would block confirmation of anyone to the post unless the White House agrees to structural changes, including turning the CFPB into a five-member commission. Alabama Republican Sen. Richard Shelby reiterated that position Sunday. "Until President Obama addresses our concerns by supporting a few reasonable structural changes, we will not confirm anyone to lead it," Mr. Shelby said. "No accountability, no confirmation."Administration officials indicated the White House may be willing to make some minor concessions to win confirmation of Mr. Cordray, but won't support a commission structure.Ms. Warren, who lured Mr. Cordray to the CFPB, threw her support behind what she called a "stellar" choice. "Rich has always had my strong support because he is tough and he is smart—and that's exactly the combination this new agency needs," she said in a statement.People close to Ms. Warren said she would return to Harvard University in the fall. She is considering exploring a 2012 Senate run in Massachusetts but discussions are just in the preliminary stages, these people said.The CFPB is one of the most controversial components of the Dodd-Frank financial overhaul. The agency has the ability to write new consumer-protection rules, enforce more than a dozen existing federal consumer-finance laws, dispatch examiners to review banks' books and records and investigate consumers' complaints. Its rules can only be overturned by a super-majority of the new Financial Stability Oversight Council, which is headed by the Treasury Department, or by the courts.Critics, including the financial-services industry, have expressed concern over how the new watchdog agency would wield its expansive authority. Supporters see the agency as providing critical protections against potentially deceptive and abusive consumer financial products, such as payday loans, mortgages and credit cards.If confirmed, Mr. Cordray is expected to take an aggressive stance against the types of fraudulent and abusive practices he targeted as attorney general. He gained national attention for his leading role filing lawsuits against mortgage lenders accused of shoddy foreclosure practices.Consumer groups and Democratic lawmakers said they were upset Ms. Warren hadn't been chosen for the post but indicated they planned to support Mr. Cordray. "While I am disappointed that Elizabeth Warren won't be at the top of the agency she envisioned, Cordray was one of her first hires as its director of enforcement, and was by all accounts a smart and tough attorney general in Ohio," said Rep. Carolyn Maloney (D., N.Y.).Many in the banking industry support the structural changes being sought by Republican lawmakers and said they were withholding judgment on Mr. Cordray. "As we have stated repeatedly, we would prefer to see the bureau run by a commission like the FTC, the SEC, and even the Consumer Product Safety Commission," said Richard Hunt, president of the Consumer Bankers Association.